Q3 2025 Bridgewater Bancshares Inc Earnings Call

All participants have been placed in listen only mode. After Bridgewater is opening remarks, there will be a question and answer session to ask a question. Please press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two please note that today's.

Speaker #3: Good morning and welcome to the Bridgewater Bancshares 2025 third quarter earnings Results call . My name is Megan , and I will be your conference operator today .

Operator: Good morning and welcome to the Bridgewater Bancshares Inc. 2025 third quarter earnings results call. My name is Megan and I will be your conference operator today. All participants have been placed in listen-only mode. After Bridgewater's opening remarks, there will be a question and answer session. To ask a question, please press star, then one on your touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. Please note that today's call is being recorded. At this time, I would like to introduce Justin Horstman, Vice President of Investor Relations, to begin the conference call. Please go ahead.

Speaker #3: All participants have been placed in . Listen only mode . After Bridgewater's opening remarks , there will be a question and answer session .

Speaker #3: To ask a question , please press star . Then one on your touch tone phone . If you are using a speakerphone , please pick up your handset before pressing the keys .

Call is being recorded at this time I would like to introduce Justin Horstman, Vice President of Investor Relations to begin the conference call. Please go ahead.

Speaker #3: To withdraw your question , please press star then two . Please note that today's call is being recorded . At this time , I would like to introduce Justin Horstman Vice President of Investor Relations to begin the conference call .

Thank you Megan and good morning, everyone. Joining me on today's call are Jerry Bach, Chairman and Chief Executive Officer, Joe Schabowski, President and Chief Financial Officer, Nick place, Chief Banking Officer, Katy morale, Chief Credit Officer, and Jeff Shell Berg Deputy Chief Credit Officer in.

Speaker #3: Please go ahead .

Speaker #4: Thank you , Megan , and good morning , everyone . Joining me on today's call are Jerry Bock , Chairman and Chief Executive Officer , Joseph Chybowski President and Chief Financial Officer Nick Plas , chief banking officer Katie Morrell , chief credit officer .

Justin Horstman: Thank you, Megan, and good morning, everyone. Joining me on today's call are Gerald Baack, Chairman and Chief Executive Officer; Joseph M. Chybowski, President and Chief Financial Officer; Nicholas Place, Chief Banking Officer; Katie Morrell, Chief Credit Officer; and Jeff Shellberg, Deputy Chief Credit Officer. In just a few moments, we will provide an overview of our 2025 third quarter financial results. We will be referencing a slide presentation that is available on the Investor Relations section of Bridgewater Bancshares Inc.'s website, investors.bridgewaterbankmn.com. Following our opening remarks, we will open the call for questions. During today's presentation, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. We caution that such statements are predictions and that actual results may differ materially.

Just a few moments we will provide an overview of our 2025 third quarter financial results, we will be referencing a slide presentation that is available on the Investor Relations section of Bridgewater website investors that Bridgewater Bank M N Dot com.

Speaker #4: And Jeffrey Shellberg deputy chief credit officer . In just a few moments , we will provide an overview of our 2025 third quarter financial results .

Following our opening remarks, we will open the call for questions.

Speaker #4: We will be referencing a slide presentation that is available on the Investor Relations section of Bridgewater's website . Investors . Bridgewater Bank . Com following our opening remarks , we will open the call for questions during today's presentation .

During today's presentation, we may make projections or other forward looking statements regarding future events or the future financial performance of the company. We caution that such statements are predictions and that actual results may differ materially.

Please see the forward looking statement disclosure in the slide presentation, and our 2025 third quarter earnings release for more information about risks and uncertainties, which may affect us. The information. We will provide today is as of and for the quarter ended September 32025, and we undertake no duty to update the information.

Speaker #4: We may make projections or other forward looking statements regarding future events or the future financial performance of the company . We caution that such statements are predictions and that actual results may differ materially .

Speaker #4: Please see the forward looking statement disclosure in the slide presentation and our 2020 third quarter earnings release . For more information about risks and uncertainties , which may affect us .

Justin Horstman: Please see the forward-looking statement disclosure in the slide presentation and our 2025 third quarter earnings release for more information about risks and uncertainties which may affect us. The information we will provide today is as of and for the quarter ended September 30, 2025, and we undertake no duty to update the information. We may also disclose non-GAAP financial measures during this call. We believe certain non-GAAP financial measures, in addition to the related GAAP measures, provide meaningful information to investors to help them understand the company's operating performance and trends and to facilitate comparisons with the performance of our peers. We caution that these disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP. Please see our slide presentation and 2025 third quarter earnings release for reconciliations of non-GAAP disclosures to the comparable GAAP measures.

We may also disclose non-GAAP financial measures. During this call. We believe certain non-GAAP financial measures. In addition to the related GAAP measures provide meaningful information to investors to help them understand the company's operating performance and trends and to facilitate comparisons with the performance of our peers. We caution that these disclosures should not be viewed as a substitute for.

Speaker #4: The information we will provide today is as of and for the quarter ended September 30, 2025, and we undertake no duty to update the information.

Speaker #4: We may also disclose . non-GAAP financial measures during this call . We believe certain non-GAAP financial measures , in addition to the related GAAP measures , provide meaningful information to investors to help them understand the company's operating performance and trends , and to facilitate comparisons with the performance of our peers .

Results determined in accordance with GAAP. Please see our slide presentation in 2025 third quarter earnings release for reconciliations of non-GAAP disclosures to the comparable GAAP measures.

Speaker #4: We caution that these disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP . Please see our slide presentation and 2025 third quarter earnings release for reconciliations of non-GAAP disclosures to the comparable GAAP measures .

I would now like to turn the call over to Bridgewater, as chairman and CEO Jerry Bot.

Thank you Justin and thank you everyone for joining us this morning in the third quarter. Our team continued to demonstrate our ability to take market share by growing deposits and generating loans, which resulted in steady net interest income growth we.

Speaker #4: I would now like to turn the call over to Bridgewater's chairman and CEO , Jerry Bock . Thank you , Justin , and thank you , everyone for joining us .

Justin Horstman: I would now like to turn the call over to Bridgewater Bancshares Inc.'s Chairman and CEO, Gerald Baack.

Gerald Baack: Thank you, Justin, and thank you, everyone, for joining us this morning. In the third quarter, our team continued to demonstrate our ability to take market share by growing deposits and generating loans, which resulted in steady net interest income growth. We saw strong core deposit growth with balances up 11.5% annualized. This continues to be a testament to our talented banking teams and the relationship model we prioritize. The relatively steady pace of core deposit growth we have seen over the past year has positioned us to be more aggressive on the loan front, as our loan-to-deposit ratio remains near the lower end of our target range. We generated strong loan growth of 6.6% annualized during the third quarter, as we continue to see growth across multiple asset classes, including the affordable housing space. This helped drive a $1.6 million increase in net interest income during the quarter.

Speaker #4: This morning, in the third quarter, our team continued to demonstrate our ability to take market share by growing deposits and generating loans, which resulted in steady net interest income growth.

We saw a strong core deposit growth with balances up 11, 5% annualized this.

This continues to be a testament to our talented banking teams and the relationship model we prioritize the.

Speaker #4: We saw strong core deposit growth with balances up 11.5% annualized . This continues to be a testament to our talented banking teams and the relationship model .

The relatively steady pace of core deposit growth, we have seen over the past year has positioned us to be more aggressive on the loan front as our loan to deposit ratio remains near the lower end of our target range.

Speaker #4: We prioritize the relatively steady pace of core deposit growth . We have seen over the past year has positioned us to be more aggressive on the loan front , as our loan deposit ratio remains near the lower end of our target range .

We generated strong loan growth of six 6% annualized during the third quarter as we continue to see growth across multiple asset classes, including the affordable housing space.

Speaker #4: We generated strong loan growth of 6.6% annualized during the third quarter. As we continue to see growth across multiple asset classes, including the affordable housing space.

This helped drive a $1 $6 million increase in net interest income during the quarter.

We also saw one basis point of net interest margin expansion to 263%.

Speaker #4: This helped drive a $1.6 million increase in net interest income during the quarter . We also saw one basis point of net interest margin expansion to 2.63% .

Joe will talk more about the margin in a minute, but we are optimistic about our ability to see more meaningful expansion in the coming quarters.

Gerald Baack: We also saw one basis point of net interest margin expansion to 2.63%. Joe will talk more about the margin in a minute, but we are optimistic about our ability to see more meaningful expansion in the coming quarters. Asset quality continues to be a strength, as non-performing assets remained at consistently low levels and net charge-offs were just 0.03% of loans. We continue to see some modest risk rating migration within the portfolio, which our Chief Credit Officer, Katie Morrell, will touch on shortly, but we continue to feel good about the portfolio overall. Lastly, we've developed a reputation for consistently building tangible book value, which you can see on slide four, as tangible book value per share increased 20% annualized in the third quarter and is up 14% annualized year to date. This continues to be how we drive shareholder value.

Asset quality continues to be a strength as nonperforming assets remained at consistently low levels and net charge offs were just 0.03% of loans.

Speaker #4: will talk more about the margin in a minute , but we are optimistic about our ability to see more meaningful expansion in the coming quarters .

We continue to see some modest risk rating migration within the portfolio, which our chief credit Officer, Katie Morrell will touch on shortly but we continue to feel good about the portfolio overall.

Speaker #4: Asset quality continues to be a strength, as non-performing assets remained at consistently low levels, and net charge-offs were just 0.03% of loans.

Speaker #4: We continue to see some modest risk rating migration within the portfolio , which our chief Credit officer , Katie Joe portfolio overall . Lastly , we've developed a reputation for consistently building tangible book value , which you can see on slide four .

Lastly, we have developed a reputation for consistently building tangible book value, which you can see on slide four as tangible book value per share increased 20% annualized in the third quarter and is up 14% annualized year to date.

This continues to be how we drive shareholder value.

Speaker #4: Tangible book value per share increased 20% annualized in the third quarter and is up 14% annualized year to date. This continues to be how we drive shareholder value.

Before I turn it over to Joe I want to share an update regarding the successful completion of two significant initiatives in the third quarter.

The launch of our new retail and small business online banking platform in July and the systems conversion of our acquisition of first Minnetonka Citibank in September.

Speaker #4: Before I turn it over to Joe, I want to share an update regarding the successful completion of two significant initiatives in the third quarter.

Gerald Baack: Before I turn it over to Joe, I want to share an update regarding the successful completion of two significant initiatives in the third quarter: the launch of our new retail and small business online banking platform in July and the systems conversion of our acquisition of First Minnetonka City Bank in September. The new online banking platform gives our clients an updated, robust platform to enhance the way they manage their finances at Bridgewater. In addition, it provides our smaller entrepreneurial clients with a platform designed specifically for them. The team worked tirelessly to ensure smooth migrations initially for Bridgewater clients and then convert to our newly acquired clients a few months later. The success of both conversions reinforced my confidence that we have the right team to take advantage of future M&A opportunities as they become available.

The new online banking platform gives our clients an updated robust platform to enhance the way they manage their finances at Bridgewater.

Speaker #4: The launch of our new retail and small business online banking platform in July , and the systems conversion of our acquisition of First Minnetonka , Citibank in September .

In addition, it provides our smaller entrepreneurial clients with a platform designed specifically for them.

Speaker #4: The new online banking platform gives our clients an updated , robust platform to enhance the way they manage their finances . At Bridgewater .

The team worked tirelessly to ensure smooth migrations initially for Bridgewater clients and then convert to our newly acquired clients a few months later.

Speaker #4: In addition , it provides our smaller entrepreneurial clients with a platform designed specifically for them . The team worked tirelessly to ensure smooth migrations , initially for Bridgewater clients and then convert to our newly acquired clients a few months later .

The success of both conversions reinforced my.

Confidence that we have the right team to take advantage of future M&A opportunities as they become available.

In August we also announced some transitions to our strategic leadership team, most notably Mary Jane Crocker, Our Chief strategy Officer, and Jeff <unk>, Our Chief Credit Officer will both be retiring in 2026.

Speaker #4: The success of both conversions reinforced my confidence that we have the right team to take advantage of future M&A opportunities as they become available .

Speaker #4: In August , we also announced some transitions to our strategic leadership team , most notably Mary Jane Crocker , our chief Strategy officer , and Jeffrey Shellberg , our Chief Credit officer will both be retiring in 2026 .

Gerald Baack: In August, we also announced some transitions to our strategic leadership team. Most notably, Mary Jane Crocker, our Chief Strategy Officer, and Jeff Shellberg, our Chief Credit Officer, will both be retiring in 2026. Mary Jane will join our board of directors next year, while Jeff will continue to work alongside Katie in a Deputy Chief Credit Officer role until his retirement, ensuring Bridgewater's credit culture remains consistent. Jeff and Mary Jane have been with me at Bridgewater since founding the bank in 2005. I'm so appreciative of their contributions, and quite simply, Bridgewater would not be what it is without them. By executing the succession plan we have been working on for a few years, I am confident in the leadership of the bank going forward.

Jane will join our board of Directors next year, while Jeff will continue to work alongside Katy and the Deputy Chief Credit officer role until his retirement, ensuring Bridgewater as credit culture remains consistent.

Speaker #4: Mary Jane will join our board of directors next year, while Jeff will continue to work alongside Katie in a Deputy Chief Credit Officer role until his retirement.

Jeff and Mary Jane and I have been with me at Bridgewater since founding the bank in 2025, I am so appreciative of their contributions and quite simply Bridgewater would not be what it is without them.

Speaker #4: Ensuring Bridgewater's credit culture remains consistent , Jeff and Mary Jane have been with me at Bridgewater since founding the bank in 2025 . I'm so appreciative of their contributions and quite simply , Bridgewater would not be what it is without them .

By executing the succession plan, we have been working on for a few years I am confident in the leadership of the bank going forward.

We elevated Katie Morel to Chief Credit Officer.

Speaker #4: By executing the succession plan , we have been working on for a few years , I am confident in the leadership of the bank going forward .

Jessica Stejskal to the new role of Chief experience Officer, and Laura <unk> to her role as Chief administrative officer, all three of our talented individuals with strong worth ethic spring and a diverse set of skills I am thrilled that we have the internal talent to continue to drive our unconventional culture and continue our growth trajectory.

Speaker #4: We elevated Katie Morrell to chief credit officer Jessica Stejskal to the new role of Chief Experience officer and Laura Espeseth to her role as chief administrative officer .

Gerald Baack: We elevated Katie Morrell to Chief Credit Officer, Jessica Stejskal to the new role of Chief Experience Officer, and Laura Espeseff to her role of Chief Administrative Officer. All three are talented individuals with strong work ethics bringing a diverse set of skills. I am thrilled that we have the internal talent to continue to drive our unconventional culture and continue our growth trajectory. Overall, I believe Bridgewater is well positioned as we head into the fourth quarter and in 2026. Our outlook for loan and deposit growth remains very strong as we continue to see opportunities from M&A disruption in the Twin Cities. Our goal is to grow to become a $10 billion bank by 2030, and we believe we're on track to get there. Our balance sheet is well positioned for meaningful net interest margin expansion in this rates-down environment.

Speaker #4: All three are talented individuals with strong work ethic , bringing a diverse set of skills . I am thrilled that we have the internal talent to continue to drive our unconventional culture and continue our growth trajectory .

Murray.

Overall, I believe Bridgewater as well positioned as we head into the fourth quarter and in 2026, our outlook for loan and deposit growth remains very strong as we continue to see opportunities from M&A disruption in the twin cities.

Speaker #4: Overall , I believe Bridgewater is well positioned as we head into the fourth quarter and in 2026 , our outlook for loan and deposit growth remains very strong as we continue to see opportunities from M&A disruption in the Twin Cities .

Our goal is to grow to become a $10 billion bank by 2030, and we believe we are on track to get there our balance sheet is well positioned for meaningful net interest margin expansion in this rates down environment.

Speaker #4: Our goal is to grow , to become a $10 billion bank by 2030 , and we believe we're on track to get there .

With the systems conversion is behind US we look for expense growth to return to more normalized levels in line with asset growth and the twin cities market trends remain favorable which will hopefully support continued strong asset quality.

Speaker #4: Our balance sheet is well positioned for meaningful net interest margin expansion . In this rates down environment , with a systems conversions behind us .

Gerald Baack: With the systems conversions behind us, we look for expense growth to return to more normalized levels in line with asset growth, and the Twin Cities market trends remain favorable, which will hopefully support continued strong asset quality. With that, I will turn it over to Joe.

Speaker #4: We look for expense growth to return to more normalized levels in line with asset growth. The Twin Cities market trends remain favorable, which will hopefully support continued strong asset quality.

With that I will turn it over to Joe.

Thank you Gerry slide five highlights another quarter of strong net interest income growth driven by annualized average, earning asset growth of 16% and one basis point of net interest margin expansion to $2 63.

Speaker #4: With that , I will turn it over to Joe . Thank you . Jerry . Slide five highlights another quarter of strong net interest income growth driven by annualized average earning asset growth of 16% and one basis point of net interest margin expansion to two .

Justin Horstman: Thank you, Gerald. Slide five highlights another quarter of strong net interest income growth driven by annualized average earning asset growth of 16% and one basis point of net interest margin expansion to 2.63%. As we mentioned last quarter, we were not expecting much margin expansion in the third quarter, as we anticipated the higher asset yield repricing to be mostly offset by a couple of specific headwinds, which is what we saw. The most notable headwind was the $80 million of subordinated debt at 7.625% we issued in June, which we used to redeem $50 million of outstanding subordinated debt at 5.25%. This created a six basis point net drag on margin in the third quarter. We also continued to see the ongoing benefit of the purchase accounting accretion diminish, as it contributed just four basis points to margin during the quarter.

As we mentioned last quarter, we were not expecting much margin expansion in the third quarter as we anticipated the higher asset yield repricing to be mostly offset by a couple of specific headwinds, which is what we saw.

Speaker #4: 63 . As we mentioned last quarter , we were not expecting much margin expansion in the third quarter as we anticipated the higher asset yield repricing to be mostly offset by a couple of headwinds , which is what we saw .

The most notable had been headwind was the $80 million of subordinated debt at seven spot 65, we issued in June, which we used to redeem $50 million of outstanding subordinated debt at five in a quarter.

Speaker #4: The most notable headwind headwind was the $80 million of subordinated debt at 7.625 . We issued in June , which we used to redeem 50 million of outstanding subordinated debt at five and a quarter .

This created a six basis point net drag on margin in the third quarter.

We also continued to see the ongoing benefit of the purchase accounting accretion diminish as it contributed just four basis points to margin during the quarter.

Speaker #4: This created a six basis point net drag on margin in the third quarter . We also continued to see the ongoing benefit of the purchase accounting accretion diminish as it contributed just four basis points to margin during the quarter .

In addition, we had higher than expected average cash balance and cash balances in the third quarter due to our strong deposit growth.

While this has put added pressure on the margin we view it as a good thing as it created more net interest income dollars and gives us more funding to deploy into future loan growth.

Speaker #4: In addition , we had higher than expected average cash cash balances in the third quarter due to our strong deposit growth . While this put added pressure on the margin , we view it as a good thing as it created more net interest income dollars and gives us more funding to deploy into future loan growth .

Justin Horstman: In addition, we had higher than expected average cash balances in the third quarter due to our strong deposit growth. While this put added pressure on the margin, we view it as a good thing as it created more net interest income dollars and gives us more funding to deploy into future loan growth. Looking ahead, we are well positioned for more meaningful net interest margin expansion in the fourth quarter and into 2026, especially given the full quarter impact of the September rate cut and the potential for additional cuts. In fact, we believe we have a path to get to a 3% margin by early 2027. Combining our margin expansion with the loan growth outlook that Nick will talk about in a few minutes, we are in a great position to continue driving net interest income growth from here.

Looking ahead, we are well positioned for more meaningful net interest margin expansion in the fourth quarter and into 2026.

Specially given the full quarter impact of the September rate cut and the potential for additional cuts in.

Speaker #4: Looking ahead, we are well positioned for more meaningful net interest margin expansion in the fourth quarter and into 2026, especially given the full quarter impact of the September rate cut and the potential for additional cuts.

In fact, we believe we have a path to get to a 3% margin by early 2027.

Combining our margin expansion with the loan growth outlook that Nick will talk about in a few minutes. We are in a great position to continue driving net interest income growth from here.

Speaker #4: In fact , we believe we have a path to get to a 3% margin by early 2027 . Combining our margin expansion with the loan growth outlook that Nick will talk about in a few minutes .

Turning to slide six our loan yields continued to reprice higher even in the current environment.

Speaker #4: We are in a great position to continue driving net interest income growth from here . Turning to slide six . Our loan yields continued to reprice higher even in the current environment .

Loan yields increased five basis points during the third quarter, which was a slower pace in the second quarter as we saw less <unk>.

Justin Horstman: Turning to slide six, our loan yields continue to reprice higher, even in the current environment. Loan yields increased five basis points during the third quarter, which was a slower pace than the second quarter, as we saw less new originations and payoffs, resulting in less overall churn of the portfolio. With $608 million of fixed-rate loans scheduled to mature over the next 12 months at a weighted average yield of 5.69%, and another $140 million of adjustable-rate loans repricing or maturing at 3.85%, we still have more loan repricing upside ahead of us, as new originations in the third quarter were in the mid-sixes. We would expect this repricing to be a tailwind to margin going forward, especially as the portfolio continues to turn over. Overall, total earning asset yields increased seven basis points to 5.63%, as we also saw an increase in securities yields during the quarter.

New originations and payoffs, resulting in less overall churn of the portfolio.

Speaker #4: Loan yields increased five basis points during the third quarter, which was a slower pace than in the second quarter. As we saw less new originations and payoffs, this resulted in less overall churn of the portfolio.

With $608 million of fixed rate loans scheduled to mature over the next 12 months and a weighted average yield of $5 69, and another $140 million of adjustable rate loans repricing or maturing at $3 85, we still have more loan repricing upside ahead of us as new originations in the third quarter were in the mid sixes.

Speaker #4: With $608 million of fixed-rate loans scheduled to mature over the next 12 months at a weighted average yield of 5.69%, and another $140 million of adjustable-rate loans.

We would expect this repricing to be a tailwind to margin going forward, especially as the portfolio continues to turnover.

Speaker #4: Repricing or maturing at 3.85 . We still have more loan repricing , upside ahead of us as new originations in the third quarter were in the mid 60s .

Overall total, earning asset yields increased seven basis points to 563 as we also saw an increase in securities yields during the quarter.

Speaker #4: We would expect this repricing to be a tailwind to margin going forward, especially as a portfolio continues to turn over. Overall, total earning asset yields increased seven basis points to 5.63%.

The cost of total deposits were $3 19, continuing the stabilization trend we have seen throughout 2025.

However, we should see deposit cost decline in the fourth quarter as we have $1 7 billion of funding tied to short term rates, including $1 4 billion of immediately adjustable deposits that we reprice lower immediately following the recent rate cut in mid September.

Speaker #4: As we also saw an increase in securities yields during the quarter . The cost of total deposits were 319 . Continuing the stabilization trend , we have seen throughout 2025 .

Justin Horstman: The cost of total deposits was 3.19%, continuing the stabilization trend we have seen throughout 2025. However, we should see deposit costs decline in the fourth quarter, as we have $1.7 billion of funding tied to short-term rates, including $1.4 billion of immediately adjustable deposits that we repriced lower immediately following the recent rate cut in mid-September. Turning to slide seven, we continue to see strong revenue growth trends driven by the momentum in net interest income. Fee income has also been a contributing component to revenue growth in recent quarters due to increased swap fee income and investment advisory fees. We did see fee income decline in the third quarter, however, due to the lack of swap fee income. We mentioned last quarter that swap fees would continue to be part of the revenue mix going forward, and we expect that to continue to be the case.

Speaker #4: However , we should see deposit costs decline in the fourth quarter as we have 1.7 billion of funding tied to short term rates , including 1.4 billion of immediately adjustable deposits that we repriced lower immediately following the recent rate cut in mid-September .

Turning to slide seven we continue to see strong revenue growth trends driven by the momentum in net interest income.

<unk> income has also been a contributing component to revenue growth in recent quarters due to increased swap fee income and investment advisory fees.

Speaker #4: Turning to slide seven , we continue to see strong growth trends driven by the momentum in net interest income . Fee income has also been a contributing component to revenue growth in recent quarters .

We did see fee income decline in the third quarter. However, due to the lack of swap fee income.

We mentioned last quarter that swap fees would continue to be part of the revenue mix going forward and we expect that to continue to be the case.

Speaker #4: Due to increased swap fee income and investment advisory fees . We did see fee income decline in the third quarter , however , due to the lack of swap fee income .

However, this just highlights the lumpiness of these fees over.

Over the past five quarters swap fees have averaged about 300000 per quarter, but a range from zero to nearly $1 million.

Speaker #4: We mentioned last quarter that swap fees would continue to be part of the revenue mix going forward , and we expect that to continue to be the case .

Speaker #4: However , this just highlights the lumpiness of these fees over the past five quarters . Swap fees have averaged about 300,000 per quarter , but have range from zero to nearly $1 million .

Justin Horstman: However, this just highlights the lumpiness of these fees. Over the past five quarters, swap fees have averaged about $300,000 per quarter, but have ranged from $0 to nearly $1 million. I can say that we expect a rebound in swap fees in the fourth quarter, as we have already booked some in October. On slide eight, as expected, the higher-than-usual increase in non-interest expenses we have seen year to date continued in the third quarter, as we have had some redundant expenses this year leading up to the core conversion. We added 17 full-time equivalent employees during the quarter, which drove an increase in salary expense. Marketing expenses were also elevated during the quarter due to advertising directly related to our focus on bringing talent and clients from the Old National and Bremer Bank disruption, which have been bearing fruit.

I can say that we expect a rebound in swap fees in the fourth quarter as we have already booked some in October.

On slide eight as expected the higher than usual increase in noninterest expenses, we have seen year to date continued in the third quarter as we have had some redundant expenses this year, leading up to the core conversion.

Speaker #4: I can say that we expect a rebound in swap fees in the fourth quarter, as we have already booked some in October.

Speaker #4: On slide eight , as expected , the higher than usual increase in non-interest expenses we have seen year to date continued in the third quarter , as we have had some redundant expenses this year leading up to the core conversion .

We added 17 fulltime equivalent employees during the quarter, which drove an increase in salary expense and marketing expenses were also elevated during the quarter due to advertising directly related to our focus on bringing talent and clients from the old national and brammer disruption, which have been bearing fruit.

Speaker #4: We added 17 full time equivalent employees during the quarter , which drove an increase in salary expense . Marketing expenses were also elevated during the quarter due to advertising directly related to our focus on bringing talent and clients from the old National and Bremer disruption , which have been bearing fruit .

We feel much of the higher expenses in the third quarter were really opportunistic in nature as we continue to position the bank for ongoing growth.

Now that the systems conversion is behind US we would expect expenses to return to growing more in line with asset growth over time.

Speaker #4: We feel much of the higher expenses in the third quarter were really opportunistic in nature . As we continue to position the bank for ongoing growth , now that the systems conversion is behind us , we would expect expenses to return to growing more in line with asset growth over time .

Justin Horstman: We feel much of the higher expenses in the third quarter were really opportunistic in nature, as we continue to position the bank for ongoing growth. Now that the systems conversion is behind us, we would expect expenses to return to growing more in line with asset growth over time. With that, I'll turn it over to Nick. Thanks, Joe. Slide nine highlights the strong core deposit momentum we have seen over the past year, which continued in the third quarter as core deposits grew 11.5% annualized and are now up 7.4% annualized year to date. Core deposits are the lifeblood of what we do here. This more consistent growth we have seen recently provides us the ability to grow the bank in a more profitable way. You can see it from a deposit mix shift standpoint.

With that I'll turn it over to Nick.

Thanks, Joe Slide nine highlights the strong core deposit momentum we have seen over the past year, which continued in the third quarter as core deposits grew 11, 5% annualized and are now up seven 4% annualized year to date.

Speaker #4: With that , I'll turn it over to Nick . Thanks , Joe . Slide nine highlights the strong core deposit momentum we have seen over the past year , which continued in the third quarter as core deposits grew 11.5% annualized and are now up 7.4% .

Core deposits are the lifeblood of what we do here. This more consistent growth we have seen in recent we've seen recently provides us the ability to grow the bank in a more profitable way.

Speaker #5: Annualized year to date . Core deposits are the lifeblood of what we do here . This more consistent growth we have seen in recent seen recently provides us the ability to grow the bank in a more profitable way .

You can see it from a deposit mix shift standpoint during the third quarter noninterest bearing deposits increased approximately $35 million, while broker deposits declined by about the same amount.

Overall, we continue to feel good about the core deposit pipeline, especially given opportunities out there related to the local emanated disruption.

Speaker #5: You can see it from a deposit mix , shift standpoint during the third quarter , noninterest bearing deposits increased approximately 35 million , while brokered deposits declined by about the same amount .

Justin Horstman: During the third quarter, non-interest-bearing deposits increased approximately $35 million, while brokered deposits declined by about the same amount. Overall, we continue to feel good about the core deposit pipeline, especially given opportunities out there related to the local M&A disruption. Turning to slide ten, as we mentioned last quarter, we expected loan growth to be in the mid to high single digits in the second half of the year after outperforming these expectations in the first half. This is what we saw in the third quarter as loan balances increased 6.6% annualized and are now up 12% annualized year to date. Generating loan growth has never been a problem for Bridgewater.

Turning to slide 10, as we mentioned last quarter, we expected loan growth to be in the mid to high single digits in the second half of the year. After outperforming these expectations in the first half and this is what we saw in the third quarter as loan balances increased six 6% annualized and are now up 12% annualized year to date.

Speaker #5: Overall, we continue to feel good about the core deposit pipeline, especially given opportunities out there related to the local M&A disruption.

Speaker #5: Turning to slide ten . As we mentioned last quarter , we expected loan growth to be in the mid to high single digits in the second half of the year after outperforming these expectations in the first half .

And Iterating loan growth has never been a problem for Bridgewater with more consistent core deposit growth loan pipelines that remain at three year highs opportunities from M&A disruption and a 98% loan to deposit ratio that is in the lower half of our target range. We are in a good position to continue being aggressive on the loan front.

Speaker #5: And this is what we saw in the third quarter as loan balances increased 6.6% annualized and are now up 12% annualized year to date , generating loan growth has never been a problem for Bridgewater , with more consistent core deposit growth , loan pipelines that remain at three year highs .

Justin Horstman: With more consistent core deposit growth, loan pipelines that remain at three-year highs, opportunities from M&A disruption, and a 98% loan-to-deposit ratio that is in the lower half of our target range, we are in a good position to continue being aggressive on the loan front. We also had several deals we expected to close in the third quarter that were pushed out a quarter. As a result, we should have a bit of a head start here in the fourth quarter. Overall, we continue to expect near-term loan growth to be in the mid to high single-digit range. This will, of course, be dependent on the ongoing pace of core deposit growth, as well as loan payoffs, which can be difficult to predict.

We also had several deals we expected to close in the third quarter that were pushed out a quarter. As a result, we should have a bit of a head start here in the fourth quarter.

Speaker #5: Opportunities from M&A disruption and a 98% loan to deposit ratio that is in the lower half of our target range . We are in a good position to continue being aggressive on the loan front .

Overall, we continue to expect near term loan growth to be in the mid to high single digit range.

Speaker #5: We also had several deals we expected to close in the third quarter that were pushed out a quarter. As a result, we should have a bit of a head start here in the fourth quarter.

This will of course be dependent on the ongoing pace of core deposit growth as well as loan payoffs.

Can be difficult to predict.

Speaker #5: Overall , we continue to expect near-term loan growth to be in the mid to high single digit range . This will , of course , be dependent on the ongoing pace of core deposit growth , as well as loan payoffs , which can be difficult to predict .

Turning to slide 11, you can see our loan origination activity, which was down a bit in the third quarter, primarily due to some deal closing sliding from the third quarter to the fourth quarter as I mentioned earlier we.

We would expect us to pick back up in the fourth quarter as our pipeline remains at a three year high.

Speaker #5: Turning to slide 11 . You can see our loan origination activity , which was down a bit in the third quarter , primarily due to some deal closing , sliding from the third quarter to the fourth quarter .

Justin Horstman: Turning to slide 11, you can see our loan origination activity, which was down a bit in the third quarter, primarily due to some deal closing sliding from the third quarter to the fourth quarter, as I mentioned earlier. We would expect this to pick back up in the fourth quarter as our pipeline remains at a three-year high. Payoffs have also trended a bit lower recently, and while payoffs are a drag on loan growth, these recycled dollars will allow us to continue to fund new loan originations at attractive yields. Turning to slide 12, the loan growth we saw in the third quarter was spread across several key asset classes, including construction, multifamily, non-owner occupied commercial real estate, and even 1-4 family.

Passive also trended a bit lower recently and while payoffs are a drag on loan growth. These recycle dollars will allow us to continue to fund new loan originations at attractive yields.

Speaker #5: As I mentioned earlier , we would expect this to pick back up in the fourth quarter as our pipeline remains at a three year high .

Turning to slide 12, the loan growth we saw in the third quarter was spread across several key asset classes, including construction multifamily non owner occupied CRE and even one to four family.

Speaker #5: Payoffs have also trended a bit lower recently, and while payoffs are a drag on loan growth, these recycled dollars will allow us to continue to fund new loan originations at attractive yields.

As mentioned last quarter that construction.

Speaker #5: Turning to slide 12 . The loan growth we saw in the third quarter was spread across several key asset classes , including construction , multi-family , non-owner occupied CRE and even 1 to 4 family .

An area, where we would be seeing more balance sheet growth following an increase in new construction projects in the back half of 2020 for these projects are now starting to fund driving an increase in balances in the third quarter. We would expect this to continue being a catalyst for loan growth throughout 2026.

Speaker #5: As mentioned last quarter , that construction was an area where we would be seeing more balance sheet growth following an increase in new construction projects in the back half of 2020 .

Justin Horstman: As mentioned last quarter, construction was an area where we would be seeing more balance sheet growth following an increase in new construction projects in the back half of 2024. These projects are now starting to fund, driving an increase in balances in the third quarter. We would expect this to continue being a catalyst for loan growth throughout 2026. While it isn't called out in its own section of the portfolio, we continue to have success in our national affordable housing vertical as this drove much of the multifamily growth during the quarter. With that, I'll turn it over to Katie.

And while it isn't called out its own section of the portfolio. We continued to have success in our national Affordable housing vertical is this drove much of the multifamily growth during the quarter.

Speaker #5: These projects are now starting to fund, driving an increase in balances in the third quarter. We would expect this to continue being a catalyst for loan growth throughout 2026.

Matt I'll turn it over to Katie.

Speaker #5: While it isn't called out in its own section of the portfolio , we continue to have success in our national affordable housing vertical as this drove much of the multifamily growth during the quarter .

Thanks, Nick Slide 13 provides a closer look at our multifamily and office exposure, we continue to see positive multifamily trends in the twin cities. This includes lower vacancy rates, which recently dropped below 6% strong absorption and reduced use of concessions all of which suggest a favorable outlook for higher levels of <unk>.

Speaker #5: With that , I'll turn it over to Katie .

Speaker #4: Thanks . Nick . Slide 13 provides a closer look at our multifamily and office exposure . We continue . to see positive multifamily trends in the Twin Cities .

Katie Morrell: Thanks, Nick. Slide 13 provides a closer look at our multifamily and office exposure. We continue to see positive multifamily trends in the Twin Cities. This includes lower vacancy rates, which recently dropped below 6%, strong absorption, and reduced use of concessions, all of which suggest a favorable outlook for higher levels of net operating income. We continue to expand our affordable housing business both locally and on a national basis. The portfolio now totals $611 million, with $467 million in multifamily, while the rest is in land, construction, or non-real estate. The total portfolio has grown at a 27% annualized pace year to date. We feel good about this portfolio from a credit standpoint, as we continue to work with experienced developers across the country and because of the shortage of affordable housing nationwide. Our non-owner occupied CRE office exposure remains limited at just 5% of total loans.

Net operating income.

Speaker #4: This includes lower vacancy rates , which . recently dropped below 6% , strong absorption and reduced use of concessions .

We continue to expand our affordable housing business, both locally and on a national basis.

The portfolio now totaled $611 million with $467 million and multifamily while the rest is in land construction or non real estate.

Speaker #5: All of which .

Speaker #4: Suggest a favorable outlook for higher levels of net operating income .

Speaker #5: We continue .

Speaker #4: To expand our affordable housing business both locally and on a national basis . The portfolio now totals 611 million , with 467 million in multifamily , while the rest is in land construction or non-real estate .

The total portfolio has grown at a 27% annualized pace year to date, we feel good about this portfolio from a credit standpoint, as we continue to work with experienced developers across the country and because of the shortage of affordable housing nationwide.

Speaker #4: The total portfolio has grown at a 27% annualized pace year to date . We feel good about this portfolio from a credit standpoint as we continue to work with experienced developers across the country , and because of the shortage of affordable housing nationwide , our Non-owner CRE office exposure remains limited at just 5% of total loans .

Our non owner occupied CRE office exposure remains limited at just 5% of total loans. We continue to work through the one central business District office loan that is rated substandard and on non accrual, but overall, we feel good about our office portfolio.

Turning to slide 14, our overall credit profile remains strong.

Speaker #4: We continue to work through the one central business District office loan that is rated substandard and on Non-accrual . But overall , we feel good about our office portfolio .

Katie Morrell: We continue to work through the one central business district office loan that is rated substandard and on non-accrual, but overall, we feel good about our office portfolio. Turning to slide 14, our overall credit profile remains strong. Our reserve level of 1.34% is conservative compared to peers, and our non-performing assets held steady at just 0.19% of total assets, well below peer levels. Net charge-offs also remain very low at 0.03% of average loans. The minimal amount of charge-offs we had during the quarter were related to the legacy First Minnetonka City Bank portfolio. Turning to slide 15, our classified loans remain at relatively low levels. We did have one multifamily loan that migrated from special mention to substandard during the quarter. This was the loan that we moved to special mention last quarter while it was under a purchase agreement.

Our reserve level of 134% is conservative compared to peers and our nonperforming assets held steady at just <unk>, 9% of total assets well below peer levels.

Speaker #4: Turning to slide 14 . Our overall credit profile remains strong . Our reserve level of 1.34% is conservative compared to peers and our non-performing assets held steady at just 0.19% of total assets .

Net charge offs also remained very low at 0.0% to 3% of average loans the minimal amount of charge offs. We had during the quarter were related to the legacy first minnetonka Citibank portfolio.

Speaker #4: Well below peer levels . Net charge offs also remained very low , at 0.03% of average loans . The minimal amount of charge offs we had during the quarter were related to the legacy first Minnetonka City Bank portfolio .

Turning to slide 15, our classified loans remain at relatively low levels. We did have one multifamily loan that migrated from special mentioned substandard during the quarter. This is a loan that we moved to special mentioned last quarter, while it was under our purchase agreement. Unfortunately that purchase agreement was cancelled and we decided to move the loan to substandard, while we actively monitor.

Speaker #4: Turning to slide 15 . Our classified loans remain at relatively low levels . We did have one multifamily loan that migrated from special mention to substandard during the quarter .

Your new sales prospects for the property the borrower remains engaged with the bank and is committed to moving the asset quickly.

Speaker #4: This was the loan that we moved to special mention last quarter while it was under a purchase agreement. Unfortunately, that purchase agreement was canceled, and we decided to move the loan to substandard while we actively monitor new sales prospects for the property. The borrower remains engaged with the bank and is committed to moving the asset quickly.

Katie Morrell: Unfortunately, that purchase agreement was canceled, and we decided to move the loan to substandard while we actively monitor new sales prospects for the property. The borrower remains engaged with the bank and is committed to moving the asset quickly. Importantly, we do not see any systemic credit issues as our overall portfolio is performing well, and the multifamily sector continues to show favorable trends. I'll now turn it back over to Joe.

Importantly, we do not see any systemic credit issues as our overall portfolio is performing well and the multifamily sector continues to show favorable trends.

I'll now turn it back over to Joe.

Speaker #4: Importantly , we do not see any systemic credit issues as our overall portfolio is performing well and the multifamily sector continues to show favorable trends .

Thanks, Katy Slide 16 highlights our capital ratios, which remain relatively stable in the third quarter with our CET one ratio increasing slightly from 903 to 908.

Speaker #4: I'll now turn it back over to Joe . Thanks , Katie . Slide 16 highlights our capital ratios , which remain relatively stable in the third quarter with our Cet1 ratio increasing slightly from 903 to 908 .

We did not repurchase any shares during the quarter, given our strong organic growth pipeline and where the stock was trading.

Justin Horstman: Thanks, Katie. Slide 16 highlights our capital ratios, which remain relatively stable in the third quarter, with our CET1 ratio increasing slightly from 9.03% to 9.08%. We did not repurchase any shares during the quarter, given our strong organic growth pipeline and where the stock was trading. As of quarter end, we still have $13.1 million remaining under our current share repurchase authorization. In the near term, we expect capital levels to hold relatively stable, given retained earnings and our stronger growth outlook. Turning to slide 17, I'll recap our near-term expectations. Given our strong loan pipelines and opportunities we continue to see in the market, we believe we can continue to generate mid to high single-digit loan growth in the near term.

As of quarter end, we still have $13 $1 million remaining under our current share repurchase authorization.

Speaker #4: We did not repurchase any shares during the quarter. Given our strong organic growth pipeline and where the stock was trading as of quarter-end, we still have $13.1 million remaining under our current share repurchase authorization.

In the near term, we expect capital levels to hold relatively stable given retained earnings and a stronger growth outlook.

Turning to slide 17, I'll recap, our near term expectations.

Speaker #4: In the near term , we expect capital levels to hold relatively stable given retained earnings and our stronger growth outlook . Turning to slide 17 .

Given our strong loan pipelines and opportunities we continue to see in the market. We believe we can continue to generate mid to high single digit loan growth in the near term core.

Speaker #4: I'll recap our near-term expectations given our strong loan pipelines and the opportunities we continue to see in the market. We believe we can continue to generate mid to high single-digit loan growth in the near term.

Core deposit growth will continue to be a governor here, but we feel we're in a good spot to be offensive minded as our target loan to deposit ratio remains 95 to 105.

While net interest margin increased just one basis point in the third quarter.

Speaker #4: Core deposit growth will continue to be a governor here , but we feel we are in a good spot to be offensive minded as our target loan to deposit ratio remains 95 to 105 , while net interest margin increased just one basis point in the third quarter .

Justin Horstman: Core deposit growth will continue to be a governor here, but we feel we are in a good spot to be offensive-minded as our target loan-to-deposit ratio remains 95% to 105%. While net interest margin increased just one basis point in the third quarter, we feel bullish about more meaningful margin expansion over the next several quarters. We believe we have a path to get back to a 3% margin by early 2027, driven both by loan yields repricing higher and deposit costs declining with additional Fed rate cuts. At the end of the day, our focus is on driving net interest income growth, which will come from both the margin expansion and our stronger loan growth outlook.

Feel bullish about more meaningful margin expansion over the next several quarters. We believe we have a path to get back to a 3% margin by early 2027, driven both by loan yields repricing higher and deposit costs declining with additional fed rate cuts.

Speaker #4: We feel bullish about more meaningful margin expansion over the next several quarters . We believe we have a path to get back to a 3% margin by early 2027 , driven both by loan yields , repricing higher and deposit costs declining , with additional fed rate cuts .

At the end of the day, our focus is on driving net interest income growth, which will come from both the margin expansion and our stronger loan growth outlook.

Noninterest expense growth has been higher than what we've typically seen due to the later systems conversion, but now that that is behind us we expect to return to growing expenses relatively in line with asset growth over time.

Speaker #4: At the end of the day , our focus is on driving net interest income growth , which will come from both the margin expansion and our stronger loan growth outlook .

Speaker #4: Noninterest expense growth has been higher than what we have typically seen due to the later systems conversion . But now that that is behind us , we expect to return to growing expenses relatively in line with asset growth over time .

Justin Horstman: Non-interest expense growth has been higher than what we have typically seen due to the later systems conversion, but now that that is behind us, we expect to return to growing expenses relatively in line with asset growth over time. We also feel we are well-reserved at current levels and would expect provision to remain dependent on the pace of loan growth and the overall asset quality of the portfolio. I'll now turn it back to Gerald.

We also feel we are well reserved at current levels and would expect provision to remain dependent on the pace of loan growth in the overall asset quality of the portfolio.

I'll now turn it back to Jerry.

Speaker #4: We also feel we are well reserved at current levels and would expect provision to remain dependent on the pace of loan growth and the overall asset quality of the portfolio .

Thanks, Joe finishing on slide 18, I want to provide a quick update on our 2025 strategic priorities as.

As we suggested earlier, we are clearly returned to a more normalized level of profitable growth in 2025.

Speaker #4: I'll now turn it back to Jerry . Thanks , Joe . Finishing on slide 18 . I want to provide a quick update on our 2025 Strategic priorities .

Gerald Baack: Thanks, Joe. Finishing on slide 18, I want to provide a quick update on our 2025 strategic priorities. As we suggested earlier, we have clearly returned to a more normalized level of profitable growth in 2025, with 12% annualized loan growth and 7% annualized core deposit growth year to date. With a strong marketing campaign and talented team of bankers, we continue to take market share in the Twin Cities, both on the loan and deposit fronts. Our brand is stronger than ever. We continue to build strong relationships, and we are taking advantage of the ongoing M&A disruption. Our technology and operations team successfully rolled out our new retail and small business online banking platform, while also completing the systems conversion of our First Minnetonka City Bank acquisition. As we look forward, we do plan to close one of the two branches we acquired from First Minnetonka City Bank.

With 12% annualized loan growth and 7% annualized core deposit growth year to date.

Speaker #4: As we suggested earlier , we have clearly returned to a more normalized level of profitable growth in 2025 , with 12% annualized loan growth and 7% annualized core deposit growth year to date .

With a strong marketing campaign and talented team of bankers, we continued to take market share in the twin cities. Both on the loan and deposit fronts. Our brand is stronger than ever we continue to build strong relationships and we're taking advantage of the ongoing M&A disruption.

Speaker #4: With a strong marketing campaign and talented team of bankers , we continue to take market share in the Twin Cities . Both on the loan and deposit fronts .

Our technology and operations teams successfully rolled out our new retail and small business online banking platform. While also completing the systems conversion of our first Minnetonka Citibank acquisition.

Speaker #4: Our brand is stronger than ever . We continue to build strong relationships and we are taking advantage of the ongoing M&A disruption . Our technology and operations team successfully rolled out our new retail and small business online banking platform , while also completing the systems conversion of our first Minnetonka City Bank acquisition .

As we look forward, we do plan to close one of the two branches. We acquired from first Minnetonka Citibank. This will provide some additional efficiencies as we have branch coverage in the area.

Speaker #4: As we look forward , we do plan to close one of the two branches we acquired from Minnetonka , Citibank . This will provide some additional efficiencies as we have branch coverage in the area .

This brings us to eight branches, we will be bumping back up to nine when we open a de Novo branch expanding our footprint into the east Metro of the twin cities in early 2026.

Gerald Baack: This will provide some additional efficiencies as we have branch coverage in the area. While this brings us to eight branches, we will be bumping back up to nine when we open a de novo branch, expanding our footprint into the east metro of the Twin Cities in early 2026. With that, we'll open it up for questions.

Speaker #4: While this brings us to eight branches , we will be bumping back up to nine when we open a de novo branch , expanding our footprint into the East metro of the Twin Cities .

With that we'll open it up for questions.

As a reminder to ask a question. Please press Star then one on your Touchtone phone.

Speaker #4: In early 2026, with that, we'll open it up for questions.

We are using a speakerphone please pick up your handset before pressing the keys.

Your question. Please press Star then two.

Speaker #3: As a reminder to ask a question , please press star then one on your touch tone phone . If you are using a speakerphone , please pick up your handset before pressing the keys to withdraw your question , please press star then two .

Operator: As a reminder, to ask a question, please press star, then one on your touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. The first question comes from the line of Jeff Rules with DA Davidson.

At this time, we will pause momentarily to assemble our roster.

The first question comes from the line of Jeff <unk> with D. A Davidson.

Speaker #3: At this time , we will pause momentarily to assemble our roster . The first question comes from the line of Jeff Rules with D.A.

Jeff are you there we can't hear you.

Hi can you hear me now.

Hello.

Speaker #3: Davidson .

Yes, we can hear you.

Okay.

Sorry about that.

Onto the <unk>.

Margin path that you outlined towards 3%.

Wanted to see if if.

I appreciate the visibility there, but I.

Speaker #4: Jeff, are you there? We can hear you.

Justin Horstman: Jeff, are you there? We can't hear you.

I guess over the course of a year plus you expect that improvement to be.

Speaker #6: Hi . Can you hear me now ?

[Analyst]: Hi, can you hear me now?

Speaker #4: Yep. There you go.

Speaker #6: Hello ?

Justin Horstman: There you go.

[Analyst]: Hello?

Fairly measured or is it does it ramp later any since I know, there's a lot of inputs, there with rates and such but any any idea of how that kind of.

Speaker #4: Yep. We can hear you.

Justin Horstman: Yep, we can hear you.

Speaker #6: Okay . Sorry about that . On to the the margin path that you outlined towards 3% . I wanted to see if if appreciate the visibility there , but I guess over the course of a year plus , do you expect that improvement to be fairly measured or is it is it ramp later ?

[Analyst]: Oh, okay. Sorry about that. Onto the margin path that you outlined towards 3%. I wanted to see if I appreciate the visibility there, but I guess over the course of a year plus, you expect that improvement to be fairly measured, or is it ramp later? Any sense? I know there's a lot of inputs there, with rates and such, but any idea how that kind of path towards there transitions?

That path towards their transitions.

Okay.

Hey, Jeff. This is Joe Yeah, I think generally it's fairly steady I mean, it's it's two to three basis points a month I will say we are assuming those cuts happened just two of them happened in October and in December so the deposit piece might be more frontloaded, but the asset side as we lay out our portfolio.

Speaker #6: Any sense ? I know there's a lot of inputs there with rates and such , but any any idea how that kind of that path towards there transitions ?

<unk> roughly $750 million of fixed and adjustable rolling off.

Speaker #4: Hey Jeff , this is Joe . Yeah , I think generally it's it's fairly steady . I mean , it's it's 2 to 3 basis points a month .

Justin Horstman: Hey, Jeff, this is Joe. Yeah, I think generally it's fairly steady. I mean, it's two to three basis points a month. I will say, you know, we are assuming those cuts happen, just two of them happen in October and in December. The deposit piece might be more front-loaded, but the asset side, as we lay out our portfolio, roughly $750 million of fixed and adjustable rolling off kind of in the mid-fives. I think that'll happen pretty steady throughout 2026. We think it's very much achievable with just two cuts assumed early on.

Kind of in the mid fives.

So I think that'll happen.

Speaker #4: I will say , you know , we are assuming those cuts happen . Just two of them happen in October and in December .

Pretty steady throughout 2026.

But yes, we think it's very much achievable with with just two cuts assumed early on.

Speaker #4: So you know , the deposit piece might be more front loaded . But the asset side , you know , as we lay out our portfolio , you know , roughly 750 million of fixed and adjustable rolling off kind of in the mid fives .

Got it thanks and then.

Maybe rate related and turning towards the credit side, maybe for Kt or Jeff just on the.

Speaker #4: So I think that'll happen . You know , pretty steady throughout 2026 . But yeah , we we think it's it's very much achievable with you know with just two cuts .

It's kind of a clumsy question, but I would assume rate cuts would would offer some relief to your borrowers have you run any analysis of the percent of borrowers sort of a tangible benefit of 50 basis points of cuts or more I don't know if there is a.

Speaker #4: Assumed early on .

Speaker #6: Got it . Thanks . And then maybe rate related and turning towards the credit side and maybe for Katie or Jeff just on the kind of a clumsy question , but would assume rate cuts would , would offer some relief to your borrowers .

[Analyst]: Got it. Thanks. Maybe rate-related and turning towards the credit side, maybe for Katie or Jeff, just on the, it's kind of a clumsy question, but I would assume rate cuts would offer some relief to your borrowers. Have you run any analysis of the percent of borrowers, sort of a tangible benefit of 50 basis points in cuts or more? I don't know if there's a, or come in the form of upgrades, with cash flow relief. Anything you could quantify on the expected rate cuts and what that might mean for the health of the loan portfolio?

Or come in the form of upgrades with cash flow relief anyway, you could quantify on the.

Expected rate cuts and what that might mean for the health of the loan portfolio.

Speaker #6: Have you run any analysis of the percent of borrowers who sort of a tangible benefit of 50 basis points of cuts or more?

I don't think we have anything.

Quantified to share, but I mean, we are proactively.

Speaker #6: I don't know if there's a or come in the form of upgrades with cash flow relief . Anything you could quantify on the expected rate cuts and what that might mean for the health of the loan portfolio .

I'm getting ahead of any loans with repricing risk, we feel like thats getting materially better.

Since the last 18 to 24 months I'll certainly any further reduction in rates will only benefit those loans that are repricing currently at a fixed rate over the next year.

Speaker #4: You know , I don't I don't think we have anything quantified to to share . But I mean , we are proactively , you know , getting ahead of any loans with repricing risk .

[Company Representative]: I don't think we have anything quantified to share, but we are proactively getting ahead of any loans with repricing risk. We feel like that's getting materially better since the last 18 to 24 months. Certainly, any further reduction in rates will only benefit those loans that are repricing and currently at a fixed rate over the next year. A lot of those also, with the repricing risk, we potentially had action plans already in place with borrowers due to covenant failures or the pending reprice. We feel really good about having gotten ahead of any from a credit risk standpoint that have repricing risks.

And a lot of those also with the repricing risk.

We.

We have action plans already in place with with borrowers due to covenant failures or the pending repriced. So we.

Speaker #4: We feel like that's getting materially better . You know , since the last 18 to 24 months . So certainly any further reduction in rates will only benefit those loans that are repricing .

We feel really good about having gotten ahead of of any from a credit risk standpoint that have have repricing wrestle.

Speaker #4: And currently at a fixed rate over the next year . And a lot of those also with the repricing risk , have , you know , we've we've potentially had action plans already in place with with borrowers due to covenant failures or the pending reprice .

Appreciate it yes, probably a little early but that's helpful. Maybe.

Maybe just one last one sort of housekeeping.

Trying to.

<unk> the merger costs was that truly in other I know you kind of broke out in slide eight the cost I was just trying to mesh.

Speaker #4: So we feel really good about having gotten ahead of of any from a credit risk standpoint that have have repricing risks . So .

<unk> that with the press release.

Anything in professional and consulting I was a truly action out of comp out of professional consulting truly other.

Speaker #6: Appreciate it . Yeah . Probably a little early , but that's helpful . Maybe just one last one . Just a housekeeping trying to map the merger costs .

[Analyst]: Appreciate it. Yeah, probably a little early, but that's helpful. Maybe just one last one, just sort of a housekeeping. Trying to map the merger costs. Was that truly in other? I know you've kind of broke out in slide eight, the cost. I was just trying to mesh that with the press release. Anything in professional and consulting, or was it truly absent out of comp, out of professional consulting? Truly other?

Yes, this slide in.

Speaker #6: Was that truly another? I know you've kind of broken out in slide eight, the cost. I was just trying to mesh that with the press release.

That we lay out noninterest expense pulled it out.

And just highlighted so those costs that were specifically related to the merger itself.

Speaker #6: Anything in professional and consulting or was it truly absent out of comp , out of professional consulting , truly . Other .

So I think when we talk about this quarter.

The kind of the.

The increase in expenses was more salaries related ordinary course.

Speaker #4: Yeah . The slide in in that we lay out noninterest expense , pulls it out and just highlights it . So those costs that were specifically related to the merger itself .

Justin Horstman: Yeah, the slide that we lay out, non-interest expense, pulls it out and just highlights it. Those costs that were specifically related to the merger itself. I think when we talk about this quarter, the increase in expenses was more salaries related, ordinary course, marketing, given our offensive-minded efforts around Old National and Bremer Bank, advertising specifically, and then just general consulting fees. I don't know if that's answering your question.

Marketing.

Given our offensive minded efforts around OMB and brammer.

Advertising, specifically and then just general consulting fees so.

Don't know if that's answering your question yes.

Speaker #4: So I think when we talk about this quarter , you know , the kind of the increase in expenses was more salaries related , ordinary course marketing , you know , given our offensive minded efforts around OMB and Bremer advertising specifically .

The go forward the messaging is that obviously, we think the merger costs.

Kind of go away and Youre talking about the core costs, even coming down or normalizing with the pace of growth.

That's that's essentially the message.

Speaker #4: And then just general , you know , consulting fees . So I don't know if that's answering your question .

Yes, definitely I think this was kind of the last quarter, where we had that redundancy in expenses, but I think as we look forward into <unk> and then into 'twenty six.

Speaker #6: Yeah , I guess to go forward , the messaging is that obviously we think the merger costs kind of go away and you're talking about the core costs even coming down or normalizing with the pace of growth is that that's essentially the message .

[Analyst]: Yeah, I guess to go forward, the messaging is that obviously we think the merger costs kind of go away, and you're talking about the core costs even coming down or normalizing with the pace of growth. Is that that's essentially the message?

We view expenses growing similar to how they did pre deal where its assets and expenses growing in line.

You can see that in the core kind of NIH to average assets.

Speaker #4: Yep , definitely . I think this was kind of the last quarter where we had that redundancy and expenses . But I think , you know , as we look forward into four .

It's been steady at $1 43 for the last couple of quarters.

Justin Horstman: Yep, definitely. I think this was kind of the last quarter where we had that redundancy in expenses. I think, you know, as we look forward into Q4 and then into 2026, you know, we view expenses growing similar to how they did pre-deal, where it's, you know, assets and expenses growing in line. You can see that in the core kind of NIE to average assets. You know, it's been steady at 1.43 the last couple of quarters. We envision if we grow at a mid to high single-digit pace next year, that expenses would grow in line.

We envision if we grow at a mid to high single digit pace next year that expenses would would grow in line.

Speaker #4: Q and then into 26 , you know , we view expenses growing similar to how they did pre deal where it's , you know , assets and expenses growing in line .

Great. Thank you.

The next question comes from the line of Brendan Nosal with Husky Group. Please go ahead.

Speaker #4: You can see that in the core kind of knee-to-average assets, you know, it has been steady at $143 million the last couple of quarters.

Hey, good morning folks thanks for taking the question I hope you're doing well.

Speaker #4: So we envision if we grow at a mid to high single digit pace next year , that expenses would would grow in line .

Hey, Brendan.

Just to circle back to kind of the margin outlook really appreciate you guys, putting a stake in the ground a little further out than you typically do.

Speaker #6: Great . Thank you .

[Analyst]: Great. Thank you.

Kind of on the moving pieces of that 3% margin.

Speaker #3: The next question comes from the line of Brendan Nosal with HFD Group. Please go ahead.

Operator: The next question comes from the line of Brendan Nozel with Houde Group. Please go ahead.

Get the rate cut commentary out of the fed that's underpinning that.

Speaker #6: Hey good morning folks .

[Analyst]: Hey, good morning, folks. Thanks for taking the question. Hope you're doing well.

Speaker #7: Thanks for taking the question . Hope you're doing well .

Can you just speak to kind of assumptions for with the belly of the yield curve does and how that impacts.

Speaker #4: Brendan .

Justin Horstman: Hey, Brendan.

Speaker #7: Just just to circle back to kind of the margin outlook . Really appreciate you guys putting a stake in the ground a little further out than you typically do .

[Analyst]: Just to circle back to kind of the margin outlook, we really appreciate you guys putting a stake in the ground a little further out than you typically do. On the moving pieces of that 3% margin, get the rate cut commentary out of the Federal Reserve that's underpinning that. Can you just speak to kind of assumptions for what the belly of the yield curve does and how that impacts backwards loan repricing? If we look at that roughly 40 basis points of margin improvement that you're kind of calling for, can you just bifurcate that between relief on the funding side and yield pickup on the loan side?

Backlog lowering pricing and then.

If we look at that roughly 40 basis points of margin improvement that you're kind of calling for it can you just bifurcate that between relief on the funding side and Youll pick up on the loan side.

Speaker #7: Just kind of on the the moving pieces of that 3% margin , get the the rate cut commentary out of the fed . That's underpinning that .

Yes, Brandon this is Joe.

Speaker #7: Can you just speak to kind of assumptions for what the belly of the yield curve does and how that impacts , you know , MacBook pricing .

I think we envision kind of the belly of the curve.

We're really staying where it is maybe some slight.

Speaker #7: And then , you know , if we look at that roughly 40 basis points of margin improvement that you're kind of calling for , can you just bifurcate that between relief on the funding side and you'll pick up on the loan side ?

Decline, but I think there.

Think slope as we've always said is is our is our friend certainly so if we kind of have a <unk>.

Terminal fed funds rate in the mid threes.

Speaker #4: Yeah , Brendan , this is Joe . You know , I think we we envision kind of the belly of the curve . You know , really staying where it is .

Justin Horstman: Yeah, Brendan, this is Joe. I think we envision kind of the belly of the curve really staying where it is, maybe some slight decline, but I think slope, as we've always said, is our friend, certainly. If we kind of have a terminal Fed funds rate in the mid-3s and the 5 to 10-year part of the curve where it's at, that's what our assumption is. Now, granted, you get more cuts or you get some flattening or steepening, I think obviously those have impacts too. Nonetheless, I think slope is certainly our friend. On the other side, in terms of bifurcating loans and deposits, I just think the comments similar to earlier where there's continued repricing throughout 2026 on the asset side, both fixed and adjustable rate loans.

Five to 10 year part of the curve, where it's at I mean, that's that's what our.

Assumption is now granted you get more cuts or you get some flattening steepening I think obviously those have impacts too but.

Speaker #4: Maybe some slight decline . But I think there , you know , I think slope , as we've always said is is our is our friend .

Nonetheless, I think slope is certainly our friend.

Speaker #4: Certainly . So if we kind of have a , you know , a terminal fed funds rate in the mid threes and you know , the 5 to 10 year part of the curve where it's at .

On the other side in terms of bifurcation in loans and deposits I just think the comments similar to.

Earlier, where theres continued repricing.

Speaker #4: I mean, that's what our assumption is. Now, granted, you get more cuts or you get some flattening or steepening. I think obviously those have impacts too.

Throughout 2026 on the asset side, both fixed and adjustable rate loans. I also think just given the pickup in origination activity the churn of the portfolio certainly.

Speaker #4: But nonetheless I think you know slope is certainly our friend on the the other side in terms of bifurcating loans and deposits . I just think the comments similar to earlier , where , you know , there's continued repricing , you know , throughout 2026 on the asset side , both fixed and adjustable rate loans , I also think just given the pickup in origination activity , the churn of the portfolio , certainly , you know , boys or increases earning asset yields specifically in the loan book .

Buoys or.

Increases, earning asset yield specifically in the loan book and then the deposit portfolio I think is most sensitive that $1 seven that we highlight.

Well, obviously benefit.

With those first two cuts that we're assuming here in October and December.

Justin Horstman: I also think just given the pickup in origination activity, the churn of the portfolio certainly buoys or increases earning asset yields, specifically in the loan book. The deposit portfolio, I think, is most sensitive. That $1.7 billion that we highlight will obviously benefit with those first two cuts that we're assuming here in October and December. The rest of the portfolio, we continue to rationalize lower in a different rate environment. I think it's both sides' coordinated effort, but I think very achievable as we think about it throughout 2026. Like I said, it's two to three basis points a month. Considering the dynamics of the composition of the balance sheet, if we're putting on loans low to mid-sixes and kind of incremental additional new funding in the low threes, we think that spread in itself is very much accretive to the existing margin.

And then the rest of the portfolio, we continue to rationalize lower in a different rate environment. So.

Yes, I think it's it's both sides coordinated effort, but I think.

Very achievable as we think about it.

Speaker #4: And then the deposit portfolio , I think , you know , is most sensitive that 1,000,000,007 that we . Highlight . You know , obviously benefit with those first two cuts that we're assuming here in October .

Throughout 2006, like I said, it's two to three basis points a month.

Considering the dynamics of the composition of the balance sheet for putting on loans low to mid sixes.

Speaker #4: In December . And then the rest of the portfolio , we continue to rationalize lower in a different rate environment . So , you know , I think it's it's both sides coordinated effort .

And kind of incremental additional new funding and the low threes.

We think that spread in itself is very much accretive to the existing margin.

Speaker #4: But I think it’s very achievable as we think about it throughout Q3 2025. Like I said, it’s 2 to 3 basis points a month.

So all of that coupled.

Coupled together is.

You know, how we can feel confident about that path to early 'twenty seven.

Speaker #4: You know considering the dynamics of the of the composition of the balance sheet , if we're putting on loans , you know , low to mid sixes and kind of incremental additional new funding in the low threes , you know , we think that spread in itself is very much accretive to the existing margin .

Yeah, Okay. Okay. Thanks for the color there that makes sense.

Maybe just kind of switching gears to.

The affordable housing piece, just kind of curious what the comfort level is in and kind of growing the national piece of that book I think the national piece is only like 4% of loans today Navy that are kind of out of market at this point.

Speaker #4: So all of that coupled together is you know how we can feel confident about that path to early 27 .

Justin Horstman: All of that coupled together is how we can feel confident about that path to early 2027.

Just kind of curious how high you're comfortable taking this over time.

Speaker #7: Yeah okay okay . Thanks for the the color there . That makes sense . Maybe just kind of switching gears to the affordable housing piece .

[Analyst]: Yeah. Okay. Thanks for the color there. That makes sense. Maybe just kind of switching gears to the affordable housing piece. Just kind of curious what the comfort level is in kind of growing the national piece of that book. I think the national piece is only like 4% of loans today, maybe, that are kind of out of market at this point. Just kind of curious how high you're comfortable taking this over time.

Hey, Brendan this is Nick.

Yes. This is Ben.

Maybe somewhat recent that we've been sharing our activity level within this space, but it's certainly not a new.

Speaker #7: Just kind of curious what the comfort level is . And , and kind of growing the national piece of that book . I think the national piece is only like 4% of loans today .

Business line for Us, it's something that we've been involved with going back to probably 2007. So we have a deep history in working knowledge within the space I think that is sort of a foundational piece that gives us a lot of comfort and understanding.

Speaker #7: Maybe that’s kind of out of the market at this point. Just kind of curious how high you're comfortable taking this over time.

Speaker #5: Hey , Brandon , this is Nick . Yeah , this has been maybe somewhat recent that we've been sharing our activity level within this space , but it's certainly not a new business line for us .

Justin Horstman: Hey, Brendan, this is Nick. This has been maybe somewhat recent that we've been sharing our activity level within this space, but it's certainly not a new business line for us. It's something that we've been involved with going back to probably 2007. We have a deep history and working knowledge within the space. I think that is sort of a foundational piece that gives us a lot of comfort in understanding not only the transactions that we get involved with, but vetting through the borrowers that we're meeting with that are new to us as we've expanded our reach beyond the Twin Cities market. The quality of borrower that we've been focusing on is really top tier.

Not only the trans air transactions that we get involved with but vetting through the borrowers that we're meeting with that are new to us as we've expanded our our reach beyond the Minneapolis St Paul market.

Speaker #5: It's something that we've been involved with . Going back to probably 2007 . So we have a deep history in working knowledge within the space .

So the quality of borrower that we've been focusing on.

Speaker #5: So I think that is sort of a foundational piece that gives us a lot of comfort in understanding , you know , not only the transaction transactions that we get involved with , but vetting through the borrowers that we're meeting with that are new to us as we've expanded our our reach beyond , you know , the Minneapolis Saint Paul market .

Is really top tier and we feel really good about the pieces of that we're getting involved with on those transactions being relatively short term in nature.

Refinancing stabilized properties as they're coming out of their compliance period.

Or providing sort of ancillary pieces of debt that are relatively short term that turn pretty quick so.

Speaker #5: So the quality of borrower that we've been focusing on is really top tier . And we feel really good about the pieces of that we're getting involved with on those transactions being relatively short term in nature .

Overall, we feel really good about how we're positioned in that space.

Justin Horstman: We feel really good about the pieces that we're getting involved with on those transactions being relatively short-term in nature, refinancing stabilized properties as they're coming out of their compliance period, or providing sort of ancillary pieces of debt that are relatively short-term that churn pretty quick. Overall, we feel really good about how we're positioned in that space. We feel like it's an underserved market that we are well-positioned to be able to provide our banking services to and grow on both sides of the equation of the balance sheet.

Feel like it's an underserved market that.

We are well positioned to be able to.

Speaker #5: You know , refinancing stabilized properties as they're coming out of their compliance period or , you know , providing sort of ancillary pieces of debt that are relatively short term , that churn pretty quick .

Provide banking services to and grow on both sides of the equation of the balance sheet certainly the loan side as maybe what we shared.

Within the prepared remarks, but that has been a really good.

Speaker #5: So , you know , overall , we feel really good about how we're positioned in that space . We feel like it's an underserved market that we have .

Source of growing core deposits as well as those client relationships are eager for a relationship bank that understands our business and are open to.

Speaker #5: We're well positioned to be able to provide our banking services to, and grow on both sides of the equation of the balance sheet.

Moving their deposit balances to us even if they are.

Based outside of the twin cities. So it certainly is a relationship game for us and we're not looking for transactional business there.

Speaker #5: You know , certainly the loan side is maybe what we shared within the prepared remarks . But that has been a really good source of growing core deposits as well as those client relationships are eager for a relationship bank that understands their business and are open to , you know , moving their deposit balances to us , even if they are , you know , based outside of the Twin Cities .

Justin Horstman: Certainly, the loan side is maybe what we shared within the prepared remarks, but that has been a really good source of growing core deposits as well, as those client relationships are eager for a relationship bank that understands their business and are open to moving their deposit balances to us, even if they are based outside of the Twin Cities. It certainly is a relationship game for us, and we're not looking for transactional business there. For a lot of those reasons, we feel good about where we're positioned in that space and how we see it providing a growth path for us in the future.

So for a lot of those reasons, we feel good about where we're positioned in that space and how we see it providing a growth path for us in the future.

Okay, Alright, well. Thank you for your thoughts Nick and I. Appreciate you guys taking the questions.

Thanks Brendan.

As a reminder to ask a question. Please press Star then one.

Speaker #5: So it certainly is a relationship game for us . And we're not looking for transactional business . There . So for a lot of those reasons , we feel good about where we're positioned in that space .

The next question comes from the line of Nathan race with Piper Sandler.

Good morning, everyone. I appreciate you taking the questions.

Speaker #5: And how we see it providing a growth path for us in the future .

Just going back to the loan growth outlook I. Appreciate your near term expectations haven't really changed but it seems like you guys have been pretty offensive in terms of some of the hires that you completed in the quarter and your.

Speaker #7: Okay . All right . Well , thank you for your thoughts , Nick . And I appreciate you guys taking the questions .

[Analyst]: Okay. All right. Thank you for your thoughts, Nick, and I appreciate you guys taking the questions.

Speaker #5: Thanks , Brendan .

Justin Horstman: Thanks, Brendan.

Speaker #3: As a reminder to ask a question , please press star then one . The next question comes from the line of Nathan Rice with Piper Sandler .

Operator: As a reminder, to ask a question, please press star, then one. The next question comes from the line of Nathan Race with Piper Sandler.

There's more to come on that point. So I'm just curious if we can expect any step change function in terms of kind of the growth trajectory into next year.

Speaker #8: Good morning everyone . I appreciate you taking the questions . Just going back to the loan growth outlook , I appreciate near term expectations .

[Analyst]: Good morning, everyone. I appreciate you taking the questions. Just going back to the loan growth outlook, I appreciate, you know, near-term expectations haven't really changed, but it seems like you guys are being pretty offensive in terms of some of the hires that you completed in the quarter, and maybe there's more to come on that point. Just curious, you know, if we can expect any, you know, step change function in terms of kind of the growth trajectory in the next year. You know, is it possible we can get back to kind of the stronger pace of growth that we saw, both in terms of loans and deposits prior to the rate hiking cycle starting in 2022?

If possible, we can get back to kind of a stronger pace of growth that we saw both in terms of loans and deposits.

Speaker #8: Haven't really changed, but it seems like you guys are being pretty offensive in terms of some of the hires that you completed in the quarter, and maybe there's more to come on that point.

Great hiking cycle started in 2022.

Yes. This is Nick.

Yes, I mean, we feel really good about where we're at from a loan growth outlook perspective, I think one thing that we're mindful of is.

Speaker #8: So just curious if we can expect any step change in terms of kind of the growth trajectory in the next year . Was it possible we can get back to kind of the stronger pace of growth that we saw , both in terms of loans and deposits prior to the rate hiking cycle starting in 2022 .

And I think we've made a lot of progress in the last 18 months about.

Aligning our loan growth to be more consistent with our with our deposit growth specifically on the core deposit front. So.

Speaker #4: Yeah .

Speaker #5: This is Nick . Yeah . I mean , we feel really good about where we're at from a loan growth outlook perspective . You know , I think one thing that we're mindful of is , you know , and I think we made a lot of progress in the last , 18 months about aligning our loan growth to be more consistent with our with our deposit growth , specifically on the deposit front .

Justin Horstman: Yeah, hey, this is Nick. We feel really good about where we're at from a loan growth outlook perspective. I think one thing that we're mindful of is, and I think we made a lot of progress in the last 18 months about aligning our loan growth to be more consistent with our deposit growth, specifically on the core deposit front. I think that that's a strategy that we're trying to employ as we think about our future loan growth. That does provide us with a more profitable path on a go-forward basis. I think it's certainly that engine is there and the potential is there to grow faster than that.

I think that Thats a strategy that we're trying to employees, we think about our future loan growth.

That does.

Provide us with a more profitable path on a go forward basis.

So I think it's certainly that engine is there and the potential is there to grow faster than that I think we're just trying to be.

Speaker #5: So , you know , I think that that's a strategy that we're trying to employ as we think about our future loan growth .

Both selective on sort of the client relationship front and the profitability front as we think about our loan growth.

Speaker #5: You know , that that does , you know , provide us with a more profitable path on a go forward basis . So I think it's certainly that engine is there .

To ensure that we're not putting ourselves in a loan to deposit <unk>.

Physician that forces us to.

Really pulled back hard on growth in a quarter or two just as we if we outperformed our expectations. So.

Speaker #5: And the potential is there to grow faster than that . I think we're just trying to be , you know , both selective on sort of the client relationship front and the profitability front as we think about our loan growth , to ensure that we're not putting ourselves in a loan or deposit .

Justin Horstman: We're just trying to be both selective on sort of the client relationship front and the profitability front as we think about our loan growth, to ensure that we're not putting ourselves in a loan or deposit position that forces us to really pull back hard on growth in a quarter or two if we outperformed our expectations. We feel good about a lot of the verticals that we're in. The disruption that we talked about within the Twin Cities is real, and we've been able to have great conversations with both clients that are impacted and production staff. I think those conversations will continue here over the next year as clients are transitioned over and as personnel find their new normal at the new organization. We're expecting to be beneficiaries on both of those fronts.

We feel good about a lot of the verticals that we're in the disruption that we talked about within the twin cities.

Is real and.

We've been able to have great conversations with both clients that are impacted and.

Speaker #5: You know , position that forces us to really pull back hard on on growth in a , in a quarter or two , just just to as we if we outperformed our expectations .

And production staff and I think.

Those conversations will continue here.

Over the next year as clients are transitioned over and is.

Speaker #5: So, you know, we feel good about a lot of the verticals that we're in. The disruption that we talked about within the Twin Cities is real.

Personnel find their new normal at the new organization.

We're expecting to be beneficiaries on both of those fronts.

Speaker #5: And , you know , we've been able to have great conversations with both clients that are impacted , you know , and production staff .

So that's certainly something that could impact the amount of our loan growth as we bring on production staff hopefully over the next year or so.

Speaker #5: And I think those conversations will continue here, you know, over the next year as clients are transitioned over and as, you know, personnel find their new normal at the new organization.

Got it that's really helpful.

Maybe just touch on where you expect to see these hires impact I mean are these more C&I related or any color in terms of.

Speaker #5: And we're expecting to be beneficiaries on both of those fronts, so that's certainly something that could impact the amount of our loan growth as we bring on production staff, hopefully over the next year or so.

<unk> growth impacts that we can see across the balance sheet.

Justin Horstman: That's certainly something that could impact the amount of our loan growth as we bring on production staff, hopefully over the next year or so.

Yes, I mean, that's certainly something that we've had as a strategic priority to improve our expertise and depth of knowledge in that space. So, yes, definitely that theres conversations within that.

Speaker #8: Got it . That's really helpful . And Nick , can you maybe just touch on where you expect to see these hires impact ?

[Analyst]: Got it. That's really helpful. Nick, can you maybe just touch on where you expect to see these hires impact? I mean, are these more commercial and industrial lending related or any color in terms of potential growth impacts that we can see across the balance sheet?

Within that front.

But we've always been opportunistic in our hiring.

Speaker #8: I mean , are these more CNI related or any color in terms of , you know , potential , you know , growth impacts that we can see across the balance sheet ?

And that's really across the bank, whether thats production staff our operations folks.

Appliance in BSA I mean.

Speaker #5: Yeah , I mean , that's certainly something that we've had as a strategic priority to improve our expertise and depth of knowledge in that space .

Justin Horstman: Yeah, I mean, that's certainly something that we've had as a strategic priority to improve our expertise and depth of knowledge in that space. Yeah, definitely, there's conversations within that, within that front. We've always been opportunistic in our hiring, and that's really across the bank. Whether that's production staff or operations folks, compliance and BSA, there's a lot of really talented banking personnel here in the Twin Cities, and we're open to having conversations with all of them. Specific to the production front, though, I think we try to differentiate ourselves by thinking about sort of niche business lines. To the extent that we can expand into a new vertical through the acquisition of a person or a team, we're definitely open to that as well. We're having conversations sort of across all of those fronts now, and hopeful that some of those will pay off here in 2026.

There's a lot of really talented bank.

Banking personnel here in the twin cities and we're open to having conversations with all of them.

Speaker #5: So yeah , definitely there's conversations within that , within that front . But you know , we've always been opportunistic in our hiring .

Specific to the production front, though I think we try to differentiate ourselves by thinking about sort of niche business lines.

Speaker #5: And that's really across the bank . You know , whether that's production staff or operations folks . You know , compliance and BSA I mean there's a lot of really talented banking personnel here in the Twin Cities .

To the extent that we can expand into a new vertical through the acquisition of <unk>.

A person or a team we're definitely open to that as well.

And we're having conversations sort of cros.

Speaker #5: And we're open to having conversations with all of them specific to the production front , though , I think , you know , we try to differentiate ourselves by thinking about sort of niche business lines and to the extent that we can expand into a new vertical through the acquisition of a person or a team , you know , we're definitely open to that as well .

All of those fronts now.

I'm hopeful that some of those will pay off here in 2026.

Okay great.

Couple of questions for Joe.

There are some differences in the year and the period average cash balances I imagine the sub debt impact at some.

Relevancy there just curious if you can touch on kind of where you'd like to run in terms of cash levels going forward and then also it looked like securities yields ticked up nicely in the quarter, just any thoughts on the securities yield trajectory from here and related.

Speaker #5: And we're having conversations sort of across all of those fronts . Now . And , and hopeful that some of those will pay off here .

Speaker #5: And in 2026 .

Speaker #8: Okay , great . Then a couple questions for Joe . There's some differences in the end of period average cash balance . As I imagine the debt impact had some relevancy .

[Analyst]: Okay. Great. A couple of questions for Joe. There's some differences in the end-of-period and average cash balances. I imagine the sub-debt impact had some relevancy there. Just curious if you can touch on kind of where you'd like to run in terms of cash levels going forward. It looked like the securities yields ticked up nicely in the quarter. Any thoughts on the securities yield trajectory from here in light of the rate outlook?

Great outlook.

Yes, I think on the cash side I think we were generally just really pleased with the core deposit growth that translated during.

Speaker #8: They're just curious if you can touch on kind of where you'd like to run in terms of cash levels going forward . And then also look like securities yields ticked up nicely in the quarter .

During the quarter I think a lot of that we'd message.

With some seasonal outflows in the second quarter, we'd come back in the third so.

Speaker #8: Just any thoughts on the securities yield trajectory from here in light of the rate outlook?

We did certainly have higher.

Average cash balances throughout the quarter.

I think we're always.

Speaker #4: Yeah , I think on the cash side , you know , I think we were generally just really pleased with , you know , the core deposit growth that translated during the quarter .

Justin Horstman: Yeah, I think on the cash side, I think we were generally just really pleased with the core deposit growth that translated during the quarter. I think a lot of that we'd messaged with some seasonal outflows in the second quarter, it would come back in the third. We did certainly have higher average cash balances throughout the quarter. I think we're always, ultimately, loan growth being top priority and given pipelines where they're at, I think we, when we think about cash and securities, we always want to have liquidity such to fund that growth. From the security standpoint, yields going forward, there were opportunities, I think just given where rates were at kind of more mid-quarter, where we saw some opportunities to put on some longer duration paper. Part of that contributed to the higher boost in securities yields during the quarter.

Ultimately loan growth being top priority and given pipelines, where they're at I think we when.

When we think about cash and securities we always want to have liquidity such to fund that growth.

Speaker #4: I think a lot of that would message, you know, with some seasonal outflows in the second quarter, would come back in the third.

<unk>.

From a security standpoint yields going forward.

Speaker #4: So, we did certainly have higher average cash balances throughout the quarter. You know, I think we're always, you know, ultimately loan growth being a top priority.

There were opportunities I think just given where rates were at kind of more mid quarter.

Where we saw some opportunities to put on some some longer duration paper.

Speaker #4: And given pipelines where they're at , I think we when we think about cash and securities , we always want to have liquidity such to to fund that growth , you know , from the security standpoint , yields going forward , you know there there were opportunities .

So part of that contributed to the higher.

Boost in securities yields during the quarter and then.

I think where we're at today.

Yeah, we're definitely active just kind of redeploying as theirs.

Speaker #4: You know, I think just given where rates were at kind of more mid-quarter, we saw some opportunities to put on some longer duration paper.

Pay downs pay offs maturities.

Some of that's also just recycling fmc's portfolio.

Which we had always kind of planned once we closed the deal last last year. So.

Speaker #4: So part of that , you know , contributed to the higher , you know , boost in securities yields during the quarter . And then , you know , I think where we're at today , we're definitely active .

I think were opportunistic in the security space as well, but I think ultimately we want to support the loan growth outlook.

Justin Horstman: I think where we're at today, we're definitely active just kind of redeploying as there's paydowns, payoffs, maturities. Some of that's also just recycling First Minnetonka City Bank's portfolio, which we had always kind of planned once we closed the deal last year. I think we're opportunistic in the security space as well, but I think ultimately, we want to support the loan growth outlook. I think where the pipeline's at, I think that's certainly bullish on continued growth there into 2026.

Speaker #4: Just kind of redeploying as there's , you know , Paydowns pay offs , maturities . Some of that's also just recycling Fmqb portfolio , which we had always kind of planned , you know , once we closed the deal last , last year .

<unk>.

And.

I think where the pipeline that I think that's that's certainly bullish on continued growth there into 'twenty six.

Okay, Great and then maybe a couple for Kt.

Speaker #4: So , you know , I think we're we're opportunistic in the security space as well . But I think ultimately , you know , we want to support the loan growth outlook .

On the one that we've talked about a couple quarters now I believe you guys have a specific allocation. There just curious if you're still expecting some charge offs. There at some point in the future and if theres any specific reserves on the credit that moved to sub standard and <unk>.

Speaker #4: And I think we're bullish on the pipelines. I think that's certainly indicative of continued growth there into 2026.

So, yes, starting with the office loan.

Speaker #8: Okay, great. And then maybe a couple for Katie. You know, on the loan that we've talked about a couple quarters.

[Analyst]: Okay. Great. Maybe a couple for Katie. On the loan that we've talked about a couple of quarters now, I believe you guys have a specific allocation there. Just curious if you're still expecting some charge-offs there at some point in the future, and if there's any specific reserves on the credit that moved to substandard in Q3.

Our specific reserve Hasnt Hasnt changed on that one is just under $3 million.

Speaker #8: Now I believe you guys have a specific allocation there . You know just curious if you're still expecting some charge offs there at some point in the future .

And we continue to see.

In our leasing.

Prospects.

Speaker #8: And you know, if there are any specific reserves on the credit that moved to substandard in Q3.

And some interest there has been more.

Turning to the office in downtown St. Paul So were.

Speaker #4: So , yeah , starting with the office loan , our specific reserve hasn't hasn't changed on that one . It's just under $3 million .

Not planning.

[Company Representative]: Yeah, starting with the office loan, our specific reserve hasn't changed on that one. It's just under $3 million, and we continue to see leasing prospects and some interest. There's been more return to the office in downtown St. Paul. We're not planning a charge-off at this time on that loan. In regards to the multifamily loan that we moved this quarter, that one does not have a specific reserve. Like we shared in the prepared remarks, the borrower's sort of moving quickly to re-engage a new buyer and hopefully sell that asset quickly.

Planning and charge off at this time on that loan and then in regards to the multifamily loan that we moved this this quarter that one does not have a specific reserve and likely shared in the prepared remarks, and the borrowers start moving quickly.

Speaker #4: And , you know , we continue to see , you know , leasing prospects and some interest . There's been more return to the office in downtown Saint Paul .

We engage in new buyer and hopefully sell that asset quickly so.

Speaker #4: So we're you know not planning a charge off at this time on that loan . And then in regards to the multifamily loan that we moved this this quarter , that one does not have a specific reserve .

Okay I appreciate all the color thanks, everyone.

This concludes our question and answer session I will now turn the call back over to Jerry Bok for any closing remarks.

Speaker #4: And like we shared in the prepared remarks , the borrowers , you know , sort of moving quickly to re-engage a new buyer and hopefully sell that asset quickly .

I want to thank everybody for joining the call today, we're really excited about our.

Our ability to take market share in the twin cities market.

Speaker #4: So .

Speaker #8: Okay , I appreciate all the color . Thanks everyone .

[Analyst]: Okay, I appreciate all the color. Thanks, everyone.

Believe the fourth quarter in 2026 will certainly be a good year for us.

Speaker #3: This concludes our question-and-answer session. I will now turn the call back over to Jerry Bock for any closing remarks.

I do want to call out.

Operator: This concludes our question and answer session. I will now turn the call back over to Gerald Baack for any closing remarks.

Some of the team members that we have here, our deposit operations technology and operations team really.

Busted their butts. These last few months to get the conversions done successfully.

Speaker #4: I want to thank everybody for joining the call today . We're really excited about , you know , our ability to take market share in the Twin Cities market and believe the fourth quarter in 2026 will certainly be a good year for us .

Gerald Baack: I want to thank everybody for joining the call today. We're really excited about, you know, our ability to take market share in the Twin Cities market and believe the fourth quarter in 2026 will certainly be a good year for us. I do want to call out and thank some of the team members that we have here. Our Deposit Operations Technology and Operations team really busted their butts these last few months to get the conversions done successfully. I also just want to do another shout-out for Mary Jane Crocker and Jeff Shellberg and how incredible they've been as partners for me, considering 20 years ago we started this bank in our basement. It's great to still both be on the board and supporting us going forward, but a great shout-out to them. Thanks for everybody taking the call today. Thanks.

And also just wanted to do another shout out for Mary Jane Crocker, and Jeff Schoenberg, an incredible business partners for me.

Speaker #4: I do want to call out and thank some of the team members that we have here. Our Deposit Operations, Technology and Operations team have really busted their butts.

Considering 20 years ago, we started this bank in our basement. So.

It's great to still both be on the board supporting us going forward, but a great shout out to them. Thanks for taking a call. It a thanks.

Speaker #4: These last few months to get the conversions done successfully , and also just want to do another shout out for Mary Jane Crocker and and Jeff Schulberg and how incredible they've been as partners for me , considering 20 years ago we started this bank in our basement .

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker #4: So it's great to still be on the board supporting us going forward . But a great shout out to them . Thanks for taking the call today .

Speaker #4: Thanks . I don't know ,

Speaker #9: I .

Justin Horstman: I don't know.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.